Working Paper: CEPR ID: DP1839
Authors: Jozef Konings; Alexander Repkin
Abstract: Stochastic frontier production functions are estimated for Bulgarian (1993?5) and Romanian (1994?5) manufacturing industries using firm-level panel data. The technical efficiency of firms is found to vary significantly both within and across industrial sectors in each country. We find strong evidence of a positive relationship between firm technical efficiency levels and their profitability, which suggests the reforms have succeeded in creating hard budget constraints. The relationship between firm efficiency and size is also found to be positive, suggesting big industrial firms in the former planned economies are not necessarily inefficient.
Keywords: efficiency; stochastic production frontier; firm size
JEL Codes: C23; C52; D24
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Firm Size (L25) | Technical Efficiency (D61) |
| Technical Efficiency (D61) | Profitability (L21) |
| Firm Size (L25) | Profitability (L21) |
| Profitability (L21) | Technical Efficiency (D61) |